Carona
Shoe Co. Ltd. & Anr Vs. K.C. Bhaskaran Nair [1989] INSC 81 (9 March 1989)
Mukharji,
Sabyasachi (J) Mukharji, Sabyasachi (J) Rangnathan, S.
CITATION:
1989 AIR 1110 1989 SCR (1) 974 1989 SCC (2) 395 JT 1989 (1) 525 1989 SCALE
(1)588
ACT:
Kerala
Buildings (Lease and Rent Control) Act 1961:
Sections
2(3), 2(6) and 11(a)--Tenants inducted into posses- sion by mortgagee--Whether
liable to eviction through a decree of Court passed in a suit for redemption of
mortgage.
Section
76(a) of the Transfer of Property Act 1882--Whether attracted.
HEAD NOTE:
The
appellants are tenants. The premises in dispute is a shop building bearing No.
T.C. 887, M.G. Road, Pazhavangadi, Trivandrum, part of a Pucca three storeyed
building owned by one M.P. Phillip. As per the settlement the shop in dispute
devolved on one of his sons, while the shop was in the possession of the
tenant. During the tenancy owner mortgaged the premises in dispute and the
remaining portions to the first defendant with a direction to receive the rent
from the tenant. The tenant was asked to attorn to the mortgagee.
The
first defendant in course of management of the property gave the building on
lease to the appellants for a higher rent; the earlier tenant having vacated
the same. The owner thereafter executed the second mortgage with a direction to
redeem the mortgage in favour of the first defendant and before the subsequent
mortgagee took steps to redeem the mortgage, the owner assigned his equity of
redemption to the respondent.
The
Respondent and the subsequent mortgagee together as plaintiffs 1 & 2 filed
a suit to redeem the mortgage of the first defendant impleading the appellants
as parties and claimed recovery of the Khas possession of the building. The
appellants contended (i) that they are tenants of the build- ing inducted into
possession by the mortgagee as a mode of enjoyment; (ii) that the mortgage deed
authorised the mort- gagee to enjoy the building by letting it out and that
they were not liable to be evicted through a decree of Court in redemption Suit
without an order under the Kerala Building (Lease and Rent Control) Act 1965.
The
trial Court decreed the suit and directed recovery of possession of the Shop
building. It took the view that the mortgagee could not induct a tenant and
give him any right to continue in possession even after the redemption of the
mortgage.
975 On
appeal, the first appellate Court held that the disputed building was a shop
building which was never in the enjoyment of the owner; mode of enjoyment of
the owner being by letting it out and when the mortgagee enjoyed the proper- ty
in that manner by letting it out, the person put in possession as a tenant was
entitled to continue in posses- sion even after redemption, until evicted under
the Rent Control Act. It also found that the mortgage deed impliedly authorised
the mortgagee to let out the building. In that view of the matter, the trial
Court's order was set aside.
The
Respondent thereupon filed a second appeal before the High Court- The High
Court took the view that it was not open to the mortgagee to induct a person
into possession which conferred any right on the tenant to continue in
possession even after redemption. Accordingly it allowed the appeal and a
decree for eviction was passed. Hence this appeal by the appellants tenant.
Dismissing
the appeal, but directing that the decree for eviction should not be executed
till the 31st October, 1989 if the appellants give usual undertaking to deliver
vacant possession on 31st October, 1989, this Court,
HELD:
That the mortgagor on redemption of mortgage gets back his own right; he is not
the successor-in-interest of the mortgagee. Interest, if any, created by the
mortgagee on the mortgagor's right, must disappear on ceasing of the interest
of the mortgagee. [983C-D] The limited estate created in favour of the
mortgagee having disappeared, all rights emanating from that limited estate
disappear and the superior right of the mortgagor comes not in place of the
mortgagee but as a result of an independent title, and as such the mortgagor
cannot be bound by any act created or any relationship contracted between the
mortgagee and the tenant, unless it is permitted by the mortgage-deed-[983G-H]
The mortgagor's right of redemption and the mortga- gee's right of foreclosure
or sale are co-extensive. [984D] Jadavji purshottam v. Dhani Navnitbhai Amaratlal
& Ors., [1988] 4 SCC 223 and Pornal Kanji Govindji & Ors. v. Vrajlal Karsandas
Purohit & Ors., [1988] 4 Judgment Today SC 307, followed.
976 Raj
Brij Raj Krishna & Anr. v.S.K. Shaw & Bros., [1951] 2 SCR 145; M/s. Raval
& Co. v.K.G. Ram Chandran & Ors., [1974] 1 SCC 424; V. Dhanpal Chettiar
v. Yesodai Ammal, [1979] 4 SCC 214; Gian Devi Anand v. Jeevan Kumar & Ors.,
[1985] 2 SCC 683 and G. Ponnial Thevar v. Nalleyam Perumal Pillai & Ors.,
[1977] 1 SCC 500 not applicable.
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 1065 of 1987.
From
the Judgment and Order dated 21.10.1986 of the Kerala High Court in S.A. No.
491 of 1980.
G. Vishwanatha
Iyer, S. Balakrishnan and M.K.D. Namboo- dri for the
Appellants.
T.S. Krishnamoorthy
Iyer, A.K. Srivastava and S.C. Birla for the Respondent.
The
Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. This appeal by
leave is from the judgment and order of the High Court of Kerala, dated 21st October, 1986. It arises in the following
circumstances:
The
building in question which is a shop building No. T.C. 887, M.G. Road, Pazhavangadi, Trivandrum, is part of a pucca three storeyed
building belonging to one M.P. Philip and as per his settlement the disputed
shop-building and two other rooms devolved on one of his sons M.M. Philip.
While this disputed shop-building was in the possession of a tenant under the
owner, the owner mortgaged the disputed building and the remaining portions to
the first defendant with a direction to receive the rent from the tenant. The
mortgagor directed the tenant also to attorn to this mortga- gee. The first
defendant subsequently in the course of his management of the mortgaged property,
gave the building on lease to the appellants for a higher rent when the former
tenant vacated the same. Subsequently, the owner executed a subsequent mortgage
with a direction to redeem the mortgage in favour of the first defendant and
before the subsequent mortgagee took steps to redeem the mortgage, the owner
assigned his equity of redemption to the respondent. The respondent and the
subsequent mortgagee together as plain- tiffs 1 and 2 filed a suit to redeem
the mortgage of the first defendant impleading the appel- 977 lants as well as
respondents and claimed recovery of the khas possession of the building. The
appellants contended that they are tenants of the building inducted into
posses- sion by the mortgagee as a mode of enjoyment that the mort- gage deed authorised
the mortgagee to enjoy the building by letting it out and they were not liable
to be evicted through a decree of court in a redemption suit without an order
under the Kerala Building (Lease & Rent Control) Act, 1965 (hereinafter
referred to as 'the Act'). The trial court decreed the suit and directed
recovery of possession of the shop-building on the ground that the mortgagee
could not induct a tenant and give him any right to continue in pos- session
even after the redemption of the mortgage. On appeal by the appellants, the
first appellate court held that the disputed building was a shop-building which
was never in the enjoyment of the owner and the mode of enjoyment of the owner
of the property was by letting it out and when the mortgagee enjoyed the
property in that manner, by letting it out, the person put in possession as a
tenant was entitled to continue in possession even after redemption, until
evicted under the Rent Control Act. The first appellate court further found
that the mortgage deed impliedly autho- rised the mortgagee to let out the
building. In that view the decree for khas possession of the shop-building in
possession of the appellants was denied to the respondent.
The
respondent filed a second appeal before the High Court, raising the following
three contentions:
(1)
Whether under section 76(a) of the Trans- fer of Property Act, 1882, a tenancy
created by the mortgagee in possession of an urban immovable property would be
binding on the mortgagor after redemption of the mortgage, assuming that the
tenancy was such as a pru- dent owner of property would have granted in the
usual course of management.
(2)
Whether a tenancy created in exercise of a general power to grant a lease
expressly or impliedly conferred on the mort- gagee would survive the
redemption of the mortgage in view of Sec. 111(c) of the Trans- fer of Property
Act, 1882; and (3) Whether a tenant inducted on the property by a mortgagee
with possession, would after redemption of the mortgage be protected under the
provisions of s. 11(1) of the Act.
The
High Court was of the view that as the appellants had not pleaded that they
were inducted into possession by the mortgagee as 978 prudent act of management,
it was not open to the appellants to contend that they could continue in
possession even after redemption. Further, the High Court was of the view that
it was not open to the mortgagee to induct a person into pos- session which
conferred any right on the tenant to continue in possession even after
redemption.
The
High Court categorically came to the conclusion that protection under s. 76(a)
of the Transfer of Property Act, 1882 was never claimed in the written
statement. On the other hand, it was contended by the appellants that this was
a pure question of law unconnected with the question of fact and, therefore, no
pleadings were necessary and even without pleading such contention could be
raised and considered by the Court at the time of argument. Whether a
particular lease is bona fide or prudent act of management, is primari- ly a
question of fact, though whether on account of the bona fide or prudent act of
the mortgagor his lessee was entitled to continue even after the mortgage was
determined, is a question of law. The High Court was of the view that the
decision on the question of law is dependent on the question of fact whether
the lease was bona fide or a prudent act of a person of ordinary prudence, who
would manage it as if it were his own. On that question of fact, there should
be definite pleading so that the plaintiff must have an oppor- tunity of
meeting the claim and adduce evidence in rebuttal.
The
High Court therefore could not sustain the right of the tenant under s. 76(a)
of the Transfer of Property Act, as a matter of prudent management. There was
no issue in this respect and the judgment of the trial court did not show,
according to the High Court, that such a contention was raised. The only
contention that was raised was that the lease was with the knowledge or consent
of the mortgagor.
The
High Court further came to the conclusion that there was no evidence in support
of that contention. The finding of the District Judge that the mortgagee had
implied authority of the mortgagor to let out, was not only lacking in plead- ings
or issue, but it was also not warranted by the provi- sion of the mortgage deed
or the evidence.
The
High Court relied on several decisions and came to the conclusion that the
provision of Sec. 76(a) of the Transfer of Property Act, 1882, which was an
exception to the general rule embodied in Sec. 111(c) applies in appro- priate
cases ordinarily only to the management of agricul- tural lands and had seldom
been extended to urban property so as to tie up in the hands of lessee or to
confer on him rights under special statutes.
The High
Court further came to the conclusion that the general 979 proposition of law is
that no man can convey a better fight than he himself has. Therefore, a
mortgagee in possession cannot create tenancy with a right to continue in
possession beyond the period of redemption. Normally, lease by the mortgagee is
determined when the mortgage is redeemed since there is no privity between the
mortgagor and the lessee.
The
question of prudent management under Sec. 76(a) of the Transfer of Property
Act, 1882 by granting of lease or otherwise normally arises only in rural
agricultural lands and not in urban immovable property. The High Court further
came to the conclusion that a mere authorisation to the mortgagee to lease the
property itself does not amount to any intention to allow expressly the
creation of a tenancy beyond the term of the mortgage. Only where the words of
the mortgage deed clearly and expressly allowed creation of tenancy beyond the
term of the mortgage that the lease would be binding on the mortgagor. In that
view of the matter, the High Court held that the learned District Judge was
wrong in holding that the defendants Nos. 2 & 3 were not liable to be
evicted in this suit and that they could be evicted only through an order of a
competent Rent Controller. In the premises, the second appeal was allowed and a
decree for eviction was passed.
Aggrieved
thereby, the appellants have come up before this Court. The question is--was
the High Court right.
The
first contention of Sri Vishwanatha Iyer, learned counsel for the appellants,
was that in view of the terms of the mortgage in the instant case, the
appellants were enti- tled to be in possession after redemption of mortgage as
against the mortgagor. He drew our attention to the mortgage deed dated 4th
July, 1960. The mortgagor in that mortgage deed stated that he was the absolute
owner of the property and therefore he was mortgaging the property. Thereafter,
the deed proceeded to state as follows:
"This
property is hereby secured to you on otti for a term of 2 years for Rs.7,000
which I have received as recited hereunder. There- fore, you may possess and
enjoy the property by collecting the rent from the tenants and after the expiry
of two years I shall pay you the sum of Rs.7,000 and get a release of the otti
ands the expenses for the release should be shared by us." The mortgagee
was to enjoy the property by collecting the rent from the tenants. This
mortgage was renewed for the second time on 980 17th August, 1977. The second
mortgage deed recited that the shop in Item I which was in possession of Carona
Shoe Compa- ny, was given for enjoyment. Therefore, the fact that the tenant
was there, is accepted.
It was
contended that as no amount was being paid as interest, the mortgagee was
entitled to the benefit, that is to say, the rent from the premises in
question. It was contended that the High Court was wrong in holding that it was
not an act of prudent management. Sri Iyer referred to the document dated 3rd
June, 1977 which recited as follows:
"But
the portion where the Ringal shop was situate alone was given possession to you
and the remaining portion forming upstairs to the shop previously Ringal Shop,
now Carona Shoe Mart, and the shed portion behind it was let out to Chellamma Pillai
by the mortgagor and she is occupying it while so the mortgagor has executed a
subsequent mortgage and an agree- ment for sale to Chellamma Pillai and she is
entitled to redeem you and recover posses- sion of the building." These
contentions, in our opinion, are concluded by the decision of this Court in PomaI,
Kanji Gvoindji & Ors. v. Vrajlal Karsandas Purohit & Ors., [1988] 4 Jmt.
Today SC 307, wherein it was held that except in cases where the leases
specifically and categorically make exceptions in favour of the tenants that
they would continue to be in possession even after the expiry or termination of
the mortgage, and those leases are acts of prudent management, the tenants
inducted by the mortgage would be entitled to the protection under the Rent Act
after the redemption of mortgage .and in no other cases.
Sri Iyer,
in our opinion, is wrong in contending that in the instant case the mortgage
deed specifically empowered the mortgagor to induct tenant who would continue
to be in possession even after the redemption or end of the mortgage.
It is
true that the mortgage deed recited that the tenants were there. It is also
true that the mortgage deed also enjoined that the method of realisation of the
rent as the method of having the usufruct of the mortgage by the mortga- gee.
But it must be understood that so long as the mortgage subsisted, there was
relationship of tenant and landlord. It could not be so after the mortgage was
redeemed. There is nothing in the mortgage-deed in the instant case which
warranted the conclusion that the mortgagee could 981 induct tenants who Would
continue beyond the term of the existence of the mortgage or who would be given
rights even after the expiry of the mortgage. Sri Iyer then submitted that this
Court in the aforesaid decision had referred to another decision of this Court,
namely, Jadavji Purshottam v. Dhami Navnitbhai Amaratlal & Ors., [1988] 4
SCC 223 where it was held that if the lease granted to the tenant by the
mortgagee had the approval or concurrence of the mortgagor, the same would
entitle the tenant to claim tenancy rights even as against the mortgagor after
he had redeemed the mortgage, then in such a case, such tenants would continue
to be in possession. Sri Iyer drew our attention to the observations of this
Court in the aforesaid decision at para 13 of page 236 of the report. With
reference to the term of the mortgage in the instant case and the
communications between the parties, Sri Iyer tried to contend that the lease
granted in favour of the appellants by the mortgagee had the approval or
concurrence of the mortgagor. We are, however, unable to accept or find in the
correspondence any such approval or concurrence. We have referred to the mort-
gage deed and the sale deed as mentioned hereinbefore. Sri Iyer drew our
attention to a letter dated 7th October, 1977 addressed to the Rent Controller
with a copy to the General Manager, Carona Shoe Co. Ltd. Therein, the
respondent had negotiated or made an offer and expressed preference for the
appellant-company. The letter contained the following state- ments:
"Under
the circumstances, I have now finally decided to settle all the issues and
start the construction of the rear portion as early as possible as I have two
more offers (other than yours) for renting out the entire ground floor (about
1,500 sq. ft.) which includes the space now occupied by you and a portion of
the first floor.
I am
writing this letter to you because my first preference is for your company. The
main reason is that you are conducting the business in the same shop for some
years. Second thing is that I have already agreed to you at the discussion even
though there was no written consent. In the light of the above, I give below my
terms and conditions for renting out the shop with additional space annexed, if
you are interested to continue the business in my building. Of course, the
expenses (portion) for the same will have to be borne by you. But I will
provide you with a very good show room considering your requirements. Necessary
bathroom, lavatory, office cabin etc. will also be provided in consulta- 982 tion
with your representative. I had a discus- sion with Mr L.W. Baaker, A.R.I.B.A.
(The British Architect who is doing so many artis- tic modern buildings and
show room etc.
throughout
India including the Chitralekha Film Studio) and the Art. Director and Interi-
or Decorator of our Studio regarding the subject." Thereafter, certain
terms and conditions of the proposed lease were suggested. Ultimately, however,
no such lease was executed. This communication strictly, in our opinion,
negates the submission that there was any concurrence or approval of the
mortgagor of the continuance of the appel- lant's as tenants after the expiry
or redemption of the mortgage.
It was
then submitted by Sri Iyer that in view of the provisions of the Act, it was
not possible for the respond- ents to execute the decree. After an exhaustive
discussion of the relevant authorities, it has been held by this Court in Pomal
Kanji Govindji's case (supra) that in respect of the urban immovable
properties, the tenants do not get any protection after the redemption of
mortgage. Sri Iyer, however drew our attention to Sec. 11 of the Act, to
contend that notwithstanding anything contained in any other law or contract, a
tenant shall not be evicted, whether in execu- tion of a decree or otherwise,
except in accordance with the provisions of the Act. He drew our attention to
the defini- tion of 'tenant' under sec. 2(6) of the Act which defines a tenant
as a person by whom or on whose account rent is payable for a building and
includes the heir or heirs of a deceased tenant and a person continuing in
possession after the termination of the tenancy m his favour. Similarly,
landlord is defined under S. 2(3) of the Act as follows:
"(3)
"landlord" includes the person who is receiving or is entitled to
receive the rent of a building, whether on his own account or on behalf of
another or on behalf of himself and other or as an agent, trustee, executor,
administrator, receiver or guardian or who would so receive the rent or be
entitled to receive the rent, if the building were let to a tenant." But
in view of the said definitions, we are of the opinion that between the
appellants and the respondent, there was never any landlord or tenant relationship.
The appellants were never the tenants of the respondent. Sri Iyer drew our
attention to the observations of this 983 Court in Raj Brij Krishna & Anr. v.S.K.
Shaw & Bros., [1951] 2 SCR 145, where it was held that the non obstante
clause would be applicable. Our attention was drawn to the observa- tions of Fazal
Ali, J. at page 150 of the report. There, the Court observed that Section 11 of
the Bihar Buildings (Lease, Rent & Eviction) Control Act, 1947 was a
self-con- tained section, and it was wholly unnecessary to go outside the Act
for determining whether a tenant was liable to be evicted or not, and under
what conditions he could be evict- ed. But in the instant case, the appellants
were not the tenants. The respondent, the original mortgagor, would never after
the redemption of the mortgage have treated the appel- lants to be tenants.
There was no relationship ever between the appellants and the respondent. The
mortgagor had a separate and distinct interest which was wiped out on the
redemption of the mortgage or expiry of the period of mort- gage. The mortgagor
on redemption of mortgage gets back his own right, he is not the
successor-in-interest of the mort- gagee. Interest, if any, created by the
mortgagee on the mortgagor's right, must disappear on ceasing of interest of
the mortgagee. In that view of the matter, in our opinion, thus the said
observations would not be of any relevance to the present case. Similarly,
reliance was placed on the observations of this Court by Sri Iyer in M/s Raval
& Co. v. K.G. Ramachandran & Ors., [1974] 1 SCC 424. The observa- tions
that the definitions of 'landlord' and 'tenant' might apply even if the
contractual tenancy has come to an end.
But
that is not the situation here in the instant case. In the said case, Bhagwati,
J. as the Chief Justice then was, in his judgment at page 439 of the report
observed that sub-section (1) of section 4 of the Act in question i.e., Tamil Nadu
Buildings (Lease & Rent Control) Act, 1960 con- templated that an
application for fixation of fair rent of a building might be made by the tenant
or the landlord. The definition of 'tenant', it was observed, included contractu-
al tenant as well as tenant remaining in possession of the building after
determination of the contractual tenancy, i.e. statutory tenant, and both
contractual tenant and statutory tenant could, therefore, apply. It was,
therefore, submitted in this case that on the analogy of the contractu- al
tenant, the appellants were entitled to the protection of the Act. We are unable
to agree. It is not a question of a contractual tenancy coming to an end. The
limited estate created in favour of the mortgagee having disappeared, all
rights emanating from that limited estate disappear and the superior fight of
the mortgagor comes not in place of the mortgagee but as a result of an
independent title, and as such the mortgagor cannot be bound by any act created
or any relationship contracted between the mortgagee and the ten- ant, unless
it is permitted by the mortgage-deed- Reliance was also placed on certain
observations of 984 this Court in V. Dhanpal Chettiar v. Yesodai Ammal, [1979]
4 SCC 2 14. Therein, it was held that under the State Rent Acts, the concept of
contractual tenancy has lost much of its significance and force. Therefore,
giving of the notice was a mere surplusage and unlike the law under the
Transfer of Property Act, 1882, it does not entitle the landlord to evict the
tenant. In our opinion, the observations of the said decision cannot have any
assistance or significance for the purpose of the issues involved in the
present controver- sy.
Our
attention was also drawn to the observations of this Court in Pomal Kanji Govindji's
case (supra) at para 42 of page 326 and it was contended that in this case
impliedly the mortgage-deed specifically and categorically made an exception in
favour of the tenants that they would continue in possession even after the
termination or redemption of the mortgage and that these leases were acts of
prudent management. In this connection, reference may be made to Section 60 of
the Transfer of Property Act. It is this which gives the mortgagor right to
redeem after the date fixed for payment. The mortgagor's right of redemption
and the mortga- gee's right of foreclosure or sale are co-extensive. Simi- larly,
Section 76(a) of the Transfer of Property Act which determines the liabilities
of the mortgagee and imposes the obligation to manage the property as a person
of ordinary prudence. In the instant case, it has been held by the High Court that
the induction of the appellants as tenant was not an act of prudent management.
Our
attention was also drawn by Sri Iyer to the observa- tion of this Court in Gian
Devi Anand v. Jeevan Kumar & Ors., [1985] 2 SCC 683 in support of his
submission that in the emerging jurisprudence of tenancy legislation the dis- tinction
between statutory tenant and contractual tenant has disappeared. The said view,
in our opinion, would be of no avail as the respondent is not the
successor-in-interest and does not come in place of the mortgagee but by virtue
of its independent title.
Reliance
was also placed on the observations of this Court in G. Ponniah Thevar v. Nalleyam
Perumal Pillai & Ors., [1977] 1 SCC 500. That decision, in our opinion, has
no application. The person inducting the tenant-appellant was a co-widow who
had a life interest in the lands. It was observed that the terms of the
statutory protection applied clearly to all tenancies governed by the Madras
Cultivating Tenants Protection Act irrespective of the nature of fights of the
person who leased the land so long as the lessor was entitled to create a
tenancy. In our opinion, the said observations would not be applic- 985 able.
The said decision deals with the right of the co-widow in the land. Reference
may be made to the facts of that case at page 504, para 10. In our opinion, in
view of the said facts, the decision would not apply to the facts of the
instant case. On the other hand, in view of the facts and ratio of the
principle of the decisions in Jadavji Purshot- tam, (supra) and PomaIii Govindji,
(supra) we are of the opinion that the contentions of Sri Iyer cannot be sus- tained.
The non obstante clause in Section 11(a) of the Act is applicable only to a
decree for eviction obtained by a landlord against a tenant. The appellants
were never the tenants of the respondent.
In the
aforesaid view of the matter, we are unable to accept the submissions urged in
this case and, therefore, the appeal must fail. But in view of the fact that
the appellants have been carrying on the business for some time in the premises
in question in order to enable them to adjust their business, we direct that
the order for eviction of the appellants should not be executed upon 31st
October, 1989 if the appellants give an undertaking within a period of four
weeks from this date to give vacant possession in a peaceful manner on 3 1st
October, 1989; and also containing the usual terms of undertaking. In default
of such undertak- ing being given within the time aforesaid, the decree will be
forthwith executed.
The
appeal is accordingly dismissed with costs.
Y.L.
Appeal dismissed.
Back